Tag Archives: fees

Remember that department-store card you signed up for to get an instant discount? Or the medical bill you didn’t pay on time?

What seem like minor moves could drive down your credit score, which factors in big time when you’re trying to finance your future home. Lenders look at how much you make, what you own and how much you’re able to put down — but your credit score also is a major factor.

“It’s four basic factors: income, assets, credit and the property itself,” said Chad Baker, a loan officer at Prime Lending, which has offices in the UTC area and Mission Valley.

“If anything is wrong with the four, then you will have problems,” he added. “If you need a higher down payment, then you can offset it with a gift from a friend or family member. But if you’ve exhausted everything (to fix your credit,) there’s nothing you can do. So, it’s extremely important.”

The good news: Certain credit-score issues can be fixed on your own at no cost as long as you understand a few financial basics — from paying bills on time to requesting your free credit reports. Those simple pointers could help you not only qualify for a mortgage but also save you up to thousands of dollars in the long run.

They can also make or break your chances in today’s tougher lending environment, which generally requires a bigger down payment and more proof of income than during the last housing boom.

A recent study shows the average credit score for someone who successfully closed any kind of mortgage in April was 745 (with 20 percent down). The findings, based on 20 percent of loan originations in the country, are from Ellie Mae, which provides services to the mortgage industry.

The U.S. average is 692, and California’s is 691, according to FICO, which rates consumers’ credit histories on a scale of 300 to 850. So, if you don’t have the 745 score cited in the Ellie Mae study, does that mean your chances of getting a mortgage are nil? No, mortgage insiders say. U-T San Diego busts that credit myth and others in this how-to guide:

Myth: Lenders are looking for one magic number.

Fact: The score range you should shoot for depends on what kind of mortgage you want…

Myth: There’s nothing I can do to change my credit score.

Fact: You have more control than you think. Changes all start with knowing what’s in your credit report…

Myth: Even if I do find an error in my credit report, it will take forever to correct.

Fact: You can get a rapid rescore done with the help of the lender…

Myth: I’ve never been late on any payment, so it’s a waste of time to check my score.

Shoppers, I bet many of you scoured the Sunday ads and bounced to several stores for deals over Thanksgiving weekend.

What if you applied that same effort and vigilance to shopping for a new home loan or refinance? That same attention to detail could translate into hundreds to thousands of dollars in savings over time.

“People think nothing about going to many different stores to buy a toaster or oven or dishwasher,” said Norma Garcia, attorney at Consumers Union, publisher of Consumer Reports magazine. “They just don’t shop for (home) loans the same way they shop for other products, but they ought to.”

Consumers likely are more comfortable comparison-shopping for microwaves than mortgages because the home-loan process can be cumbersome, with reams of paperwork, unfamiliar jargon, and of course, the rush to close and move to a new place.

The U.S. government is working to make the process easier. Since May, officials have been trying to simplify and combine two required forms that show would-be borrowers their final loan terms and costs before closing. The “Know Before You Owe” campaign, spurred by sweeping financial reforms in 2010, has produced two drafts of the merged documents that are still in testing phase…

FORMS TO KNOW

This gives you an approximation of what you may owe at closing. It lists the basics including loan amount, interest rate and potential penalty costs. The form also shows you different loan scenarios to illustrate whether it would make sense, for instance, to buy points upfront to reduce your interest rate. (One point typically equals 1 percent of the loan’s value, or $1,000 for each $100,000 borrowed.) Click here to see the whole form…

FORMS TO KNOW

You also get this at closing. The document breaks down how much you will owe in a different way. Perhaps the most important detail is the annual percentage rate, which rolls in all of your costs and is defined by HUD as the “true cost” of a loan. Click here to see the whole form…

TO-DO LIST BEFORE CLOSING

• If there’s a line item you don’t understand in any of the forms, ask about it.

• Scan for hidden costs. Third parties get proceeds from loans in the form of fees and commissions, said Norma Garcia, attorney at Consumers Union, publisher of Consumer Reports magazine.

• Know who’s going to service your loan. The holder of your loan can sell the loan to anyone, but they have to disclose the percentage of loans that are sold. “If you choose to go with that lender, just know that may not be the person you’re dealing with down the line,” Garcia said.

• If you sense your lender isn’t being upfront or answering your questions, find someone else. It may take interviewing two to three people to find the right lender.

• Get a second opinion on your loan documents from HUD-approved counselors at little or no charge. But be sure to do this before closing. For San Diego, you can call the Housing Opportunities Collaborative at (619) 283-2200 or (800) 462-0503. Someone will direct you to the right agency.

With interest rates at record lows, any homeowner with good enough credit and enough equity to can lower his or her mortgage payment by refinancing the loan.

But that option isn’t available to millions of “underwater” homeowners — people who bought their homes at or near the top of the home-price bubble, only to see their homes’ value drop below the amount they owe after home prices collapsed.

Now, the Obama Administration has unveiled a plan that will let some homeowners refinance their mortgages — and take advantage of lower interest rates — even when they owe more than their home is worth.

Among the provisions will be a measure increasing loan amounts made above the value of the home. The program is being offered under the federal government’s two-year-old Home Affordable Refinance Plan, the Federal Housing Finance Agency announced today.

Currently, the ceiling for refinancing a loan is 125% of a home’s value — for example, a $125,000 mortgage on a home worth $100,000. That ceiling would be removed for fixed-rate mortgages backed by Fannie Mae and Freddie Mac, the FHFA statement said.

Typically, you can only refinance your loan and take advantage of lower interest rates if your home is worth more than the amount you owe. After all, lenders need to have enough collateral in the home to pay off the mortgage if you stop making payments.

This has been a bind for many underwater borrowers who managed to make payments until now, but have been unable to take advantage lower rates. And being able to refinance may help many avoid foreclosure — and reduce housing’s drag on the overall economy.

According to news reports, the new plan likely will help 600,000 to 1 million borrowers refinance their mortgages. MSNBC reported, however, that is only a fraction of the estimated 11 million homeowners who are underwater.

FHFA said that details about the program should be released by Nov. 15.

But highlights include:

Eliminating fees for borrowers who refinance into shorter-term loans (for example, converting a 30-year loan into a 15-year).

Eliminating the need for a new property appraisal where there is a reliable computer-generated value estimate.

Waiving warranties that lenders make on loans sold to or guaranteed by Fannie Mae and Freddie Mac — so Fannie and Freddie won’t force them to buy back loans that go bad.

Removing the current ceiling that limits eligibility to those who owe a maximum of 25% more than their home is worth.

Two local mortgage brokers hailed the proposal as a way to help both homeowners and the overall economy.

Paul Scheper, regional manager of Greenlight Financial in Irvine, said the plan will provide a “snorkel” for underwater homeowners with good incomes and credit scores.

“Such a measure would boost the hopes of the homeowner while reducing the credit risk via lower payments of the bank,” Scheper said. “It also helps the economy because this frees up additional funds to inject back into the economy. It’s a classic Win-Win-Win.”

“There is a great chance each participating borrower is going to save hundreds of dollars per month on his or her house payments,” he said.

Lazerson said the program will encourage more lenders to participate because FHFA essentially promised lenders that Fannie and Freddie won’t have recourse if these loans go bad. That, he said, will increase price competition among lenders.

Lazerson believes the program will be “the single greatest program” to stabilize the housing market.

“Fewer homeowners will be mailing their keys back to their lenders,” Lazerson said. “Next thing you know, we’ll actually be spotting buyers at weekend open houses again.”

Subscribe via Email

Follow Me On The Web!

Heal from Foreclosure

For a Compelling Guide to weaving through ALL the experiences of a hardship with applications for coping personally and with family: having to sell Your Home is unbelievably lightened! Anyone that would never consider selling their home, this is a MUST read.